244161_JLL_HotelTopics 25/5/05 4:43 PM Page 1 June 2005 Global Hotel Management Agreement Trends BEST WESTERN HOLIDAY INN DAYS INN MARRIOTT HOTELS, RESORTS AND SUITES COMFORT INNS & SUITES RAMADA SHERATON HOTELS SUPER 8 HAMPTON INN HILTON HOTELS RADISSON HOTELS & RESORTS MOTEL 6 HOLIDAY INN EXPRESS QUALITY INNS, HOTELS & SUITES HYATT REGENCY COURTYARD BY MARRIOTT GOLDEN TULIP MERCURE TRAVELODGE HILTON INTERNATIONAL IBIS HOWARD JOHNSON NOVOTEL WESTIN DOUBLETREE HOTELS ECONO LODGE RIU HOTELS CROWNE PLAZA INTER-CONTINENTAL EMBASSY SUITES LA QUINTA INNS FAIRFIELD INN RESIDENCE INN RED ROOF INN RENAISSANCE HOTELS & RESORTS CLUB MED VILLAS & VILLAGES WYNDHAM HOTELS & RESORTS STERLING HOTELS SUMMIT HOTELS & RESORTS LE MERIDIEN PRINCE HOTELS EXTENDED STAY AMERICA MELIA HOTELS SOFITEL DISNEY HOTELS FORMULE 1 CLARION CAMPANILE FOUR POINTS SCANDIC HOTELS KNIGHTS INN FAIRMONT HOTELS SLEEP INN & SUITES BAYMONT INNS HOMESTEAD VILLAGE SHANGRI-LA HOTELS WASHINGTON HOTELS NIKKO HOTELS POSTHOUSE COUNTRY INNS & SUITES BY CARLSON BARCELO SOL HOTELS ETAP OMNI HOTELS SUBURBAN LODGE JIN JIANG FOUR SEASONS HOTELS CONCORDE DORINT HOTELS MICROTEL INN & SUITES IBEROSTAR AMERISUITES TRAVEL INN SHERATON LUXURY COLLECTION ADAM'S MARK RITZ-CARLTON TRYP HOTELS SUNROUTE OCCIDENTAL HOTELS HUSA WESTCOAST PREMIERE CLASSE HOMEWOOD BY HILTON RODEWAY INN TREFF THISTLE HOTELS GRAND HYATT FIESTA HOTELS MARITIM LTI HOTELS ORBIS HOTELS HAWTHORN SUITES TOKYU INNS GRECOTEL BEST INNS & SUITES NH HOTELES RICA HOTELS VILLAGER G.S.M. HOTELS CANDLEWOOD SUITES SUN DRURY INN RINGHOTELS NATIONAL 9 INNS HARRAH'S ANA HOTELS MOVENPICK HOTELS KEMPINSKI NEW OTANI WINGATE TAJ HOTELS STAKIS STUDIOPLUS PARK ROYAL SHONEY INNS MGM GRAND HOTELS FIRST HOTELS & RESORTS DAI-ICHI HOTELS SOL ELITE COPTHORNE AMERICINN BUDGET HOST INN OKURA HOTELS JARVIS HOTELS STEIGENBERGER LOEWS JOLLY HOTELS SWISSOTEL TOKYU HOTELS PAN PACIFIC HOTELS ROBINSON CLUB FORUM ROMANTIK HOTELS TOWNEPLACE SUITES GRUPOTEL ASTON HOTELS & RESORTS CLIMAT DE FRANCE RED CARPET INN RIHGA HOTELS MOAT HOUSE FIESTA AMERICANAS RYDGES HOTELS PARK PLAZA/PARK INN INTERNATIONAL REGAL HOTELS JURYS DOYLE HOTELS SCOTTISH INNS SOKOS OUTRIGGER HOTELS & RESORTS CENTURY HOTELS WELLESLEY INN & SUITES PRINCESS HOTELS REGENT INTERNATIONAL HOTELS MANDARIN ORIENTAL MIYAKO HOTELS & INN MELIA CONFORT SWALLOW HOTELS CROSSLAND ECONOMY STUDIO SHILO INNS PARADORES WARWICK GLOBALES (AIRTOURS) AMERIHOST INN REGAL OHANA HOTELS OF HAWAII SUMMERFIELD SUITES BY WYNDHAM LOUIS HOTELS MARRIOTT VACATION CLUB INTL HUNGUEST PROTEA HOTELS HESPERIA CENTRA MILLENNIUM ABOU NAWAS JAMESON INNS FIESTA INN OBEROI HOTELS SONESTA HOTELS GREAT EAGLE HOTELS CHAM PALACES SAHID HOTELS CLARINE PARK HYATT CUMULUS ASHOK CAMINO REAL CAVANAUGH'S BALLADINS PESTANA MASTER INN REMA HOTELS AUSTRIA TREND HOTELS ROTANA HOTELS IMPERIAL LONDON HUNGAR HOTELS SPRINGHILLSUITES INTERCITY HOTELS GUESTHOUSE INTERNATIONAL PARK INN INTERNATIONAL RED LION INNS SUMMER SUITES DAN HOTELS DEVERE HOTELS GLORIA PLAZA HOTELS, INNS & RESORTS MANDARIN/MERITUS SUSSE CHALET TRUMP HOTELS SOL CLUB CUBANACAN ATAHOTELS PROVOBIS SIGNATURE INN MARC RESORTS STARHOTELS DUSIT HOTELS BELLAGIO SANDMAN HOTELS MIRAGE COUNTRY HEARTH INN PENINSULA HOTELS EXEL INNS, EXEL HOTEL HOTEL DES GOUVERNEUR IMPERIAL HOTELS VAGABOND INNS NUIT D' HOTEL PRINCIPAL COAST HOTELS & RESORTS WELLESLEY INN LONDON SIGNATURE LOTTE PARK LANE SUNWING (AIRTOURS) LUCIEN BARRIERE TREASURE ISLAND OTHON HOTELS SIVA (AIRTOURS) BERJAYA HOTELS & RESORTS ALLEGRO RESORTS MARCO POLO MAINSTAY SUITES PRIMADONNA HOTELS PROTEA HOTELS PREMIER AMARI HOTELS & RESORTS OTAKA HOTELS ORIENT EXPRESS RIO HOTEL TULIP INN WELCOMGROUP SOL INNS FURAMA HOTELS TRADERS PLAZA LA GLORIAS QUEENS MOAT DEDEMAN HOTELS PARK PLAZAIN CONJUNCTION INTERNATIONAL WITHCENTRAL: HOTELS & RESORTS SANDALS RESORTS GOLDEN NUGGET DANUBIUS HELMSLEY HOTELS CARLTON HOTELS CONTINENTAL PLAZA DORAL HOTELS GRAN MELIA CONCORDE HOTELS HELNAN HOTELS BREEZES DOLCE INTERNATIONAL MANHATTAN EAST SUITES BAYVIEW HOTELS VILA GALE HOTELS CORUS ROYAL PRINCESS HOTELS FAMILY INNS OF AMERICA SEDONA KRASNAPOLSY WOODFIN/CHASE BRISTOL/HARVEY TULIP INN BEST WESTERN HOLIDAY INN DAYS INN MARRIOTT HOTELS, RESORTS AND SUITES COMFORT INNS & SUITES RAMADA SHERATON HOTELS SUPER 8 HAMPTON INN HILTON HOTELS RADISSON HOTELS & RESORTS MOTEL 6 HOLIDAY INN EXPRESS QUALITY INNS, HOTELS & SUITES HYATT REGENCY COURTYARD BY MARRIOTT GOLDEN TULIP MERCURE TRAVELODGE HILTON INTERNATIONAL IBIS HOWARD JOHNSON NOVOTEL WESTIN DOUBLETREE HOTELS ECONO LODGE RIU HOTELS CROWNE PLAZA INTER-CONTINENTAL EMBASSY SUITES LA QUINTA INNS FAIRFIELD INN RESIDENCE INN RED ROOF INN RENAISSANCE CLARION CAMPANILE FOUR POINTS SCANDIC HOTELS OKURA HOTELS JARVIS HOTELS STEIGENBERGER LOEWS JOLLY HOTELS SWISSOTEL TOKYU HOTELS PAN PACIFIC HOTELS ROBINSON CLUB FORUM MERCURE 244161_JLL_HotelTopics 25/5/05 4:43 PM Page 2 Global Hotel Management Agreement Trends FOREWORD INDEX Welcome to Jones Lang LaSalle Hotels’ 2005 global review of Global Management Agreement Trends 1 recently negotiated hotel management agreements. This edition of FocusOn represents an update of the global survey conducted in 2001. Americas Management Agreements 2 The results presented here are based on an analysis of over 80 hotel Asia Pacific Management Agreements 6 management agreements negotiated over the past four years across Asia Pacific, Europe and the Americas. European Management Agreements 10 Given the prevalence of lease arrangements in the European hotel market, this year we have also included a separate analysis of the European Lease Agreements 15 trends in leases in France,Germany,Italy,Spain,Switzerland and the UK. At the outset we would like to give a word of warning. This survey identifies general trends based on the sample group of agreements. It would therefore be inappropriate to apply these trends (and in particular any averages) to a specific management agreement under negotiation. We trust you find this research interesting and informative and as always, we welcome your feedback. Arthur de Haast Global CEO Jones Lang LaSalle Hotels Graeme Dickson Partner Baker & McKenzie Daniel Braham Director - Hotels Group CMS Cameron McKenna LLP 244161_JLL_HotelTopics 25/5/05 4:43 PM Page 1 Global Hotel Management Agreement Trends Welcome to Jones Lang LaSalle Hotels’ 2005 global review of recently negotiated hotel management agreements. As opposed to the previous survey conducted in 2001, which revealed a significant swing in power to the owner, this survey, which was conducted in conjunction with Baker & McKenzie and CMS Cameron McKenna LLP, reveals only minor global changes have occurred over the past four years. This is because the key commercial terms of hotel management agreements have moved as far as possible in favour of the owner. GLOBAL MANAGEMENT AGREEMENT TRENDS Performance clauses are common in the Americas and Europe and are becoming increasingly popular in Asia Pacific. These clauses Over the past four years, the length of management agreement may, for instance, require that the hotel achieve 80% of budgeted terms has become more uniform as international operators spread GOP or at least 90% of the competitive sets’ RevPAR. their influence across the globe. Average European initial terms have declined from 19 years in 2001 to 15 years in 2005,while at the While gaining in popularity in Europe and Asia Pacific, operator other end of the scale, average initial term lengths for American guarantees are not found in the Americas. In the US, incentive fees agreements have increased from 10 to 13 years. Average Asia are considered sufficient to apportion risk to the operator. Pacific initial terms have remained consistent at 12 years. All regions have an increasing propensity to include FF&E Across the board, the most common renewal options are one or Reserves in their agreements to set aside funds for ongoing capital two options of 5 years. expenditure requirements. It is now considered the norm to have such a Reserve. American agreements tend to specify a higher Renewal options are less prevalent in European agreements than in Reserve, with the average stabilised fee being 4.4% of Gross the agreements of other regions, allowing European owners Revenue. The corresponding measures for Europe and Asia Pacific increasing flexibility to change operators after the initial term are 3.9% and 3.1% respectively. has elapsed. % Agreements with Specified FF&E Reserve Average % Agreements Most Common Initial Term with Options Option Term Americas 100.0% Americas 13 92.0% 1 or 2 options Asia Pacific 96.4% of 5 yrs Europe 96.6% Asia Pacific 12 75.0% 2 options of 5 yrs Across all regions, agreements allowing termination without cause Europe 15 48.3% 1 option are increasingly rare. However, in Europe and Asia Pacific, owners of 5 yrs are recognising the value of a vacant possession clause, and termination on sale is available in the majority of cases. While average base fees have remained largely unchanged in % Agreements with American and Asia Pacific agreements over the past four years, Termination % Agreements with they have increased slightly from 1.8% to 2.2% in European Without Cause Termination on Sale agreements. Americas 9.0% 32.0% Of all three regions,Asia Pacific management agreements have the Asia Pacific 25.0% 82.1% lowest base fees, with most falling between 2-2.9%. The most common base fee in the Americas is 3.0% and the majority of base Europe 17.2% 55.2% fees in Europe are 3-3.9%. On the whole, base fees are relatively similar across the globe. In contrast, incentive fees vary significantly